India weighs mandatory blending of imported coal at power plants, sources say

India is considering telling power plants to blend imported coal with domestic supplies for the first time since 2024, three government sources said, to ease a supply crunch that has pushed monthly spot power prices to their highest since 2022.

Higher global coal demand and rising freight costs are set to make imports costlier, as Indonesian prices are up about a fifth since May while Russian prices are 14% higher and South African rates are up 19%, traders say.

Under the plan being discussed by officials of the power ministry, thermal power plants would have to blend up to 5% imported coal with domestic coal, said the sources, who are directly aware of the matter.


The plan represents a sharp reversal in New Delhi's drive to boost domestic coal production and curb imports, which helped prune overseas supplies over the past two years.

Most of India's coal-fired power plants rely primarily on domestic coal, but can blend up to 15% imported coal. Indian coal imports are already at a 15-month high.

The government's previous coal-blending directives ran from December 2021 to March 2024.

FALLING COAL STOCKS AT POWER PLANTS

But coal inventories at power plants have fallen nearly twice as fast as a year before as September electricity demand held at levels seen during India's broiling summer, in contrast to previous years' pattern of receding.

Stocks fell nearly 49% in the three months to September, compared to a decline of 26% in the year-ago period.

The rapid depletion of coal stocks is prompting New Delhi to consider mandating imports, two of the sources said.

The discussion is at an early stage and aims to save domestic coal for use next summer, one of the sources said.

All three sources spoke on condition of anonymity as they were not authorised to speak to the media.

India's Ministry of Power and the Ministry of Coal did not respond to a request for comment.

Nearly 40% of India's coal-fired power plants now hold less than three days of coal stocks, leaving utilities with little cushion as consumption outpaces fresh supplies.

POWER SECTOR GRAPPLES WITH WEATHER WOES

While warm temperatures have boosted power demand, a weak monsoon has hit hydropower generation.

At the same time, heavy rains in some coal-producing pockets of eastern India have disrupted mining, while constrained rail capacity has slowed the movement of coal to power plants.

Renewable power generation rose about 21% year-on-year but fell short of round-the-clock energy needs, ratings agency Crisil said.

The supply crunch has pushed spot power prices to an average of 7.71 rupees per unit so far in September, the highest monthly level since 2022, data showed, putting further financial pressure on already debt-laden state power distributors.